The market was in free-fall, but there were still a pair of IPOs brave enough to endure the foul weather conditions and, as we talked about last week: those that do so in a poor climate, are generally worthy of our attention.
Of course, we have to assume that anything coming out of Asia under such circumstances would be a Stealth IPO type of setup, and the more outlandish the company description, the more likely we’d see a pumped debut. And of course, the biotech bust that goes live almost knowing that it will certainly see nothing but downside. Anyway, we had opportunities to take significant wins on both setups if played diligently, but of course, the Stealth Setup is always the prime focus of my attention when I see it lined up for a debut trade, and this past week brought us a grooved fastball right down the center of the plate.
Worth watching the replay with https://twitter.com/tradingfitgirl if you would like to relive the winning action.
Catch me live at 12:00 PM EST (noon) on Benzinga Live to review last week’s winning IPO trade and preview the IPO Calendar for the week ahead:
Ok, Let’s take a look at what happened last week in IPO Land:
JE Cleantech (JCSE) – April 22, 2022 | 3.75M Shares
IPO Price: $4.00
Debut Price: $14.20
Day 1 High: $23.99
Day 1 Low: $14.20
High Since Debut: $23.99
Low Since Debut: $14.20
Day 1 Action: This was a Stealth IPO setup from the start: I mean, dishwashing services out of Singapore with a virtually unknown underwriter? All we were waiting to see was the absurd indication price in the pre-market debut to tip us off to the play: and as long as it didn’t get ‘too absurd’, we knew we had multiple upward halts on deck.
JCSE priced at $4.00 and started indicating at $8.00 – it only went from there, and climbed steadily up to an opening trade at $14.20.
This is where I’d like to stop and make some note about trading the debut on these setups. The key point is that you can’t be greedy and go try to play these for like 10,000 shares: consider that there were only 77.7k shares traded on the debut, and that your 10,000 shares will require an additional 12% more sellers to fill your order: you’ll end up pushing the price up to the point where there will be no further upside, as remaining IPO holders will happily sell once the share price reaches a certain threshold. So as a retail trader buying in on the debut, I limit my action to no more than 2,000 shares (having brutally damaged my portfolio learning this lesson the hard way on SIDU back in December 2021).
Ok, public service announcement aside, this one opened at $14.20 and ripped up into its first halt at $15.62. It then opened at $17.50 and ran into a second halt at $19.25. At this point, I was happy to lock in profits, and set my limit order during the halt at $18.00 and was please to get out at the halt open at $20.60 – though it bumped up to $22.00 before reversing, the downward action resulted in a halt at $18.54, and it would have been a nervous hold from there to remain in the trade. It opened at $19.00 but dropped as low as $17.55 before oscillating in what turned out to be a bullish pennant leveling out in the $18.50 to $19.50 range before breaking out again to a halt at $21.53, which opened at $23.01 and jumped to the high of the day at $23.99 before settling into a baseline right above the $19.50 mark until it broke down through VWAP and traded the remainder of the day in the $17.00 to $20.00 range. It closed the day at $19.00 having only traded 1.2M shares of the total 3.75M float.
Day 2 Action: This was a Friday IPO, but my guess is that we’ll have more action on Day 2.
Looking Ahead: This only traded 1.2M shares out of the 3.75M share float, and given that this was a Singaporean company, my guess is that we see some heavy selling in early pre-market trading: much like what we saw in GNS the week before on Day 2. I’ll be looking for an early pre-market sell-off for an opportunity to buy into a rally towards the market open, with an eye on a spike up into a halt in the opening minute of trading. If this happens, and I’m able to get in, then I’ll be looking to exit there. At some point this falls off a cliff, and I don’t wanna be in it when it does.
Aclarion (ACON) – April 22, 2022 | 2M Units
IPO Price: $4.25
Debut Price: $2.90
Day 1 High: $3.29
Day 1 Low: $2.16
High Since Debut: $3.29
Low Since Debut: $2.16
Day 1 Action: This was a low-float biotech IPO with warrants that was destined to get dumped by IPO buyers when it debuted at $2.90 – and it might have been even uglier were it not for the recent rebound rallies that other low-float IPOs showed that likely drew in retail traders hoping for a quick pop off the debut.
While there was a short jump from the opening trade at $2.90 up to $3.29 in the third minute of trading, it was short-lived and sold off quickly down to a baseline around $2.60. From there we saw a small bounce back up to VWAP at $2.95, but as expected, it fell off from there down to a baseline around $2.40 and a knife down to the day’s low at $2.16 around 1:45 PM EST.
But it seems that day traders were too eager to accumulate positions for a possible Day 2 rally, and the price never fell below the $2.00 threshold that I was looking for to make an entry, and the Day 1 volume of 1.71M shares was a bit more than I was hoping to see for the ideal Day 2 rally setup.
A premature rally through Power Hour saw the share price close the day at $2.72, just $0.18 below the debut price, which typically means we won’t see much of a Day 2 pop at all. I could be wrong, but it’s not the setup I’m looking for on a Day 2 (or Day 3, in the case of STSS) spike setup.
Day 2 Action: This was a Friday IPO, but my guess is that the day traders who would otherwise send this on a Day 2 run already built up their positions, which is likely to mute any potential Day 2 spike. Perhaps a 4:00 AM spike, but I’d expect that to be the high of the remainder of the short term upside run on this one.
Looking Ahead: This one still hasn’t had a halt to the upside, so maybe one comes, but don’t expect this to rally like STSS – more likely that it peters out like RVSN, given the EOD rally we saw on Day 1 and volume of shares traded so far. Better bet for this one is to hold off for a few weeks and pick up shares in the $1.00 zone for an LPX play.